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OUTSIDE LAG: In the context of economic policies, the time between corrective government action responding to a shock to the economy and the resulting affect on the economy. This is one of two primary lags in the use of economic policies. The other is inside lag, the time between a shock to the economy and corrective government action responding to the shock. The length of the outside lag, also termed impact lag, is primarily based on the speed of the multiplier process and is essentially the same for both fiscal and monetary policy. The length of the inside and outside lags is one argument against the use of discretionary policies to stability business cycles.
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                           INDEX OF CONSUMER SENTIMENT: A measure of consumer attitudes, preferences, and expectations concerning the state of the economy and business-cycle conditions that is compiled each month by the Survey Research Center at the University of Michigan. The Index of Consumer Sentiment is one of two primary measures of consumer attitudes. The other is the Consumer Confidence Index developed by The Conference Board. The Index of Consumer Sentiment is a notable measure of consumer attitudes that has consistently demonstrated its value as an indicator of future economic conditions.This index incorporates the notion that consumer expenditures are a critical component of aggregate demand for the macroeconomy. Changes in consumer confidence and attitudes affect consumer expenditures, which then affect the overall performance of the economy. In other words, if consumers are more confident, then they spend more and the economy is likely to expand. If consumers are less confident, then they spend less and the economy is likely to contract. Survey of ConsumersThe Survey Research Center at the University of Michigan undertakes a monthly Survey of Consumers that is conducted with a randomly selected, representative sample of approximately 500 U.S. households. Each household is asked a series of questions that seek to identify attitudes concerning current and expected conditions of the economy. Within this survey are five key questions used to calculate the Index of Consumer Sentiment.- An evaluation of the respondent's current financial situation.
- Expectations of the respondent's financial situation in one year.
- Expectations of the economy's overall financial situation in one year.
- Expectations of the economy's overall financial situation over the next five years.
- An evaluation of the economy's overall suitability for making major purchases.
Each question has three basic responses--better, same, or worse.In addition to the five questions used to calculate overall consumer confidence, the Survey of Consumers also poses questions dealing with government stabilization policies; expectations of economy-wide unemployment, interest rates, and inflation; expectations of family income; and possible plans to purchase housing, cars, furniture, appliances, and other durable goods. A Family of ThreeThe five main questions are used to generate three separate confidence indices. The first step in the derivation of each index is to calculate relative scores for each question. The relative score is the percent of favorable responses to a question, minus the percent of unfavorable responses, plus 100, the result of which is then rounded to the nearest whole number. - Index of Consumer Sentiment: This is the primary index generated from the study. It is calculated by summing the relative scores for all five questions and dividing by the relative score in the base year of 1966. (A constant value of 2.0 is added to the result to adjust for changes in the 1950s).
- Index of Current Economic Conditions: This index is calculated as an average of the relative scores to questions 1 and 5. Both questions reveal how respondents feel about current personal and economy-wide conditions. It too is indexed against the relative score for 1966 and a constant value of 2.0 is added.
- Index of Consumer Expectations: This index is calculated as an average of the relative responses to questions 2, 3, and 4. These three questions reveal expectations that respondents have about future personal and economy-wide conditions. It is indexed against the relative score for 1966 and a constant value of 2.0 is added, as well.
Recommended Citation:INDEX OF CONSUMER SENTIMENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: April 21, 2025].
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Today, you are likely to spend a great deal of time driving to a factory outlet seeking to buy either a rim for your spare tire or decorative celebrity figurines. Be on the lookout for letters from the Internal Revenue Service.
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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"Inside the ring or out, ain't nothing wrong with going down. It's staying down that's wrong. " -- Muhammad Ali
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ABE
Association of Business Executives
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